Buying property is a wonderful opportunity to change your life for the better, whether it's the excitement of moving into your first home, a chance to upgrade or downscale when the time is right. But the process and paperwork can be confusing, and it's best to know upfront what to expect and avoid any pitfalls that could cost you money and time.
Here's a list of important considerations...
When buying a home, emotions play a big role. You can envision yourself living in the house - which room each child will get, how the furniture will fit and whether the curtains are the right size. This is all very exciting, but we tend not to focus on any defects the property might have. Generally the serious defects are not noticeable, and only once you have moved in, do they show.
Defects may be visible or invisible, says Craig Hutchison, CEO Engel & Völkers Southern Africa. "Defects are typically rising damp which has been hidden under a coat of paint or may also be alterations to the house without the necessary approval from the local municipality, making them illegal structures.” Illegal alterations may result in the entire structure having to be demolished and reconstructed, in accordance with approved building standards.
As explained by attorneys MacRobert Inc, if you have bought your property with the voetstoots 'take as is' clause present in the sale agreement, you agree to buy the property in its current state and the seller cannot be held liable for any patent defects. For a buyer to escape the provisions of the voetstoots clause, he needs to prove that the seller deliberately concealed the defects or the lack of building plans approval with the intention to defraud the buyer. The purpose of the voetstoots clause is to protect the seller against liability for defects of which he or she is unaware.
When an offer to purchase a property is accepted by the seller, the bond application should immediately be submitted to a bank because the transaction can fall through if the buyer does not comply within the period stipulated in the agreement of sale, noted as a suspensive condition. Once your application is approved the bank will quote you their terms, you sign the necessary documents and your commitment to them for your home loan is then official.
Riaan van Deventer, Head of Real Estate at Engel & Völkers, points out that home buyers need to be alert to the fact that until such time as the property is registered in the purchaser's name, the banks may still cancel the approved home loan if they establish irregularities in the interim. As a word of caution he advises that buyers should not incur additional debt concerning a property until registration in their names is concluded.
He says there are certain regulations applied by most SA banks, and some of these are:
•In terms of the National Credit Act, an early termination fee is charged by the banks when a home loan is cancelled without giving 90 day' written notice. The fee is calculated on the outstanding balance at your current interest rate. To avoid this you should advise your bank that you wish to cancel your home loan when you decide to sell. •Your transferring attorneys should automatically notify the bank of your intention to cancel the bond (subject to a penalty fee). •Even if the loan is settled, the bond still has to be cancelled in the Deeds Office. The cancellation of the bond will be effected simultaneously with the transfer of the property in the Deeds Office. •Bonds cannot be transferred from one property to another, and every application for a home loan is considered in isolation. •If the applicant has been advised by their bank that the home loan application is approved, and the applicant feels at that point that they cannot afford the loan, they need to establish exactly what cancellation costs they will be liable for – to the bank, the seller, the agent, the attorney, etc.
Van Deventer says buyers must always calculate whether they can in fact afford the property: the deposit, transfer duty, bond registration costs and legal fees, the monthly home loan, ongoing monthly running costs and so forth. Don't over-extend your cash flow.
Sandy Reddy, Head of EV Finance mortgage originators, is confident that when they apply to the various banks on behalf of a client, they will get the best offer on each home loan. This is due to their many years of experience and full understanding of the banks' requirements. There is no charge for this service.
“Whether you're buying your first home or your fifth one, you have a much better chance of being approved for a home loan if you apply through a mortgage originator than if you try to handle things alone,” says Shaun Rademeyer, CEO of BetterBond Home Loans.
If prospective buyers are preapproved by mortgage originators they will know more accurately in which price bracket they qualify to view properties and therefore speed up the search process. You may qualify for more than you think if you apply through a reputable originator.
In some instances, when buying land or a built property, there may be a servitude present on the property you have bought. The average property investor may not understand the nature and consequences of such servitudes in respect of their land.
As explained in a recent article by attorney firm MacRobert Incorporated, the general rule if a piece of land (blokland) is subdivided into more than one portion, is that the landlocked property/properties are automatically entitled to a right of way servitude over the adjoining subdivision in order to access a public road.
The caveat to this rule is that the property owner with the direct access to a public road may unilaterally alter the path of the right of way, provided that this does not amount to unreasonable conduct and does not prejudice the landlocked owners' common law right to access the public road.
As Wendy Williams, a director of Engel & Völkers Southern Africa cautions, always ensure that the wording in an Offer to Purchase is correct and protects your rights.
A mandate means a written authority or permission given by a seller to a real estate agency, which instructs them in writing to sell their property. There are, however, a few different types of mandates, and the four most commonly used ones are briefly explained below:
Sole or Exclusive Mandate - Only one agency is awarded the exclusive rights to the market and sell your property.
•The seller's decision to accept the terms of an exclusive mandate would be based on the agent presenting a written CMA (Comparative Market Analysis), which gives accurate and comparable selling prices of properties sold and currently available in the immediate vicinity. The agreed upon listing price should then be a realistic valuation and market-related, which should attract buyers as it is correctly priced. There must also be an agreed upon marketing plan to ensure that the property is correctly exposed to the market.
•The seller agrees in writing that only one real estate agency only will market their property for a specified time - normally a 3 month period, in the current market.
•According to Engel CEO & Völkers Craig Hutchison, exclusive mandates provide many benefits to sellers. "Within our national group of offices, a high percentage of properties listed on our books are sold using this exclusive mandate method and the highest price is almost always obtained due to the accurate information in the CMA. This increases the potential of receiving the best possible offer, in the shortest period of time, from a pre-qualified buyer."
•And, very importantly, an exclusive mandate removes any chance of a costly double commission claim, says Hutchison.
Open Mandate - Any agency may market and sell your property on a first come, first serve basis.
Dual Mandate - Only 2 agencies are allowed to market and sell your property.
Shared Mandate - More than 2 agencies are allowed to market and sell your property.
There are fewer benefits to the seller when awarding an Open, Dual or Shared Mandate because of the following reasons, says Hutchison: •Property agents generally have many properties listed and therefore cannot give each property the attention or marketing budget they deserve. •Due to a large number of agents visiting your home, there is no privacy for the seller and the family. •Security of your home and its contents could be compromised by the many agents and potential buyer's walking through at inconvenient times. •Few of the potential buyers would have been prequalifiied. •Many For Sale boards erected outside your property make it appear as a "desperate" sale. •Due to the agents being busy marketing numerous other properties at the same time, they cannot provide regular written feedback to the seller.